Page 204 - Ebook health insurance IC27

The Insurance Times

operations. In sluggish economy or at the time of economic slowdown the chances
of liquidity risk increases. A large number of defaults have been seen due to
liquidity risk where the insurance company is not able to meet its obligations.
Though the company may have fixed asset it may not be feasible to sell it off and
maintain day-to-day operation. Hence liquidity risk may affect the company
badly.

e. Business environment risk: The change in the economic business environment
may severely affect the operations of the insurer. A change in the business model
or regulatory intervention or due to economic environment the insurer may find it
difficult to operate in the market. This may happen in case of multinational
companies who enter different markets and they are not fully aware of the internal
environment of the country.

f. Operational risks: operational risks may also affect the existence of the insurer.
If the operations are not professionally managed and there is no proper allocation
of resources and employees with proper backups the whole business of the
company may be in jeopardy.

What if an insurer fails?

 People may loseconfidence not only inthat company but theentire health insurance
system.

 Difficult to switch insurers due to loss of benefits.
 Policyholder's undergoing medical care may lose coverage dueto insurers default.
 New insurer may charge heavy amount from those policyholders
 New insurer may not provide facility of waiting period.
 The intermediary working for the company may not find suitable opening in

other companies.
 Employees of the insurer may be at the receiving end.

208 Guide for Health Insurance